Now that the UK general election is out of the way and the new government and politicians are gearing up to tell the populace how bad things really are I thought it might be useful to look at the state of the UK leasing nation and review what has been going on and what might happen in the immediate future.
Firstly, there are the most recent FLA statistics for Q1 2010. At first sight things looked quite rosy - apart that is from the collapse of the big ticket market. Big ticket volumes were already struggling through a reduction of about one third from around £1bn in March 2006 to around £700m in 2009, however it has now all but collapsed to just £89m in March 2010 – a drop of 87% in just one year.
At first sight a Business finance volume increase of 11% on the same period last year – the first increase since September 2008 - seems like excellent news, especially when combined with a 2% increase in Consumer finance for the same period. Unfortunately this apparent good news is probably illusory and whilst there is no helpful letter from an outgoing official to say what has happened there are sets of tyre tracks that give us a clue !
Closer examination of the statistics reveals that if new car finance is excluded from Business and Consumer finance volumes then the growth figures fall to below 2% and an actual volume reduction respectively. This means then that generally, UK businesses are still not investing in assets to produce wealth or protect jobs and that future economic growth is likely to remain stunted.
Depending on who is asked the question, the reasons why range from a lack of demand to a continuing restriction on the availability of finance. Certainly, a number of SME’s to whom I have spoken during some recent research still rate this as the number one issue affecting their plans for investment. Conversation with a number of banks and lessors indicate a significant swing to restrict lending to ‘own bank’ customers and, for some, a reduction or curtailment of facilities for smaller independent asset finance companies wholesale or block lines. Therefore, what they don’t have they can’t give.
Clearly asset finance in the UK still needs help and Invigors supports any FLA member or government action to devise a scheme to give lenders – and their credit officers – confidence once again to start lending for business assets in order to promote the UK's economic regeneration. However we believe that any such scheme should be closer to the government loan schemes of the past rather than the complex organisms recently considered.
If the UK government does finally start to take notice of lobbying by the FLA and practical advice from asset finance practitioners we might even find a way of securing faster economic growth though the adoption of asset finance as the preferred investment option. Keep everything crossed!
To discuss the strategic implications of future changes in the UK leasing market contact Chris Boobyer on +44 (0)845 003 1000 or e-mail chris.boobyer@invigors.com.
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